Far from Perot's 'giant sucking sound,' NAFTA makes sense

Mona Charen

September 02, 1993|By Mona Charen

THE president is for it, if tepidly. Most Republicans in the House and Senate support it. Forty out of 50 governors want it (and the rest wouldn't respond one way or the other). But NAFTA, the North American Free Trade Agreement, is in trouble.

Both House Majority Leader Richard Gephardt, D-Mo., and House Majority Whip David Bonior, D-Mich., have announced their intention to fight it every step of the way (bringing to mind Will Rogers' line: "I don't belong to any organized political party -- I'm a Democrat"). Ralph Nader is gearing up to defeat NAFTA, as is his unusual comrade-in-arms, Patrick Buchanan. And, of course, on the sidelines, with money to burn, is Mr. "Giant Sucking Sound" himself, Ross Perot, ready to spread disinformation around the landscape.

This anti-NAFTA coalition is quite incredible. It proves that there is a domestic parallel to the European confusion left in the wake of the Cold War. Just as old ethnic hatreds and old loyalties have resurfaced there, the demise of the Cold War here has unleashed long-dormant resentments and hoary economic ideas. Representatives Gephardt and Bonior, along with a significant percentage of Democrats on Capitol Hill, are opposed to NAFTA because their union supporters are. Mr. Nader dislikes anything that reduces the power of governments to regulate business. And Mr. Buchanan has invented a bogeyman of an "American Maastricht" out of whole cloth.

What does NAFTA actually do? Over a period of many years, it reduces tariff rates for goods passing among Canada, Mexico and the United States.

How does that benefit the United States? Mexico is our third largest trading partner after Canada and Japan. On average, Mexican tariffs on U.S. goods are 2.5 times as high as U.S. tariffs on Mexican goods. Reducing tariffs is therefore in the interest of U.S. companies seeking to export to Mexico.

Indeed, since 1986, when Mexico began to loosen its import restrictions, we have altered our trade balance with Mexico from a $5 billion deficit to a $5 billion surplus. That change represents an increase of 425,000 high-paying jobs for Americans. According to the office of the U.S. trade representative, the wages of workers in Mexican-export industries are 12 percent higher than the national average.

Opponents of NAFTA think Mexico has nothing to offer us but illegal immigrants and a low-wage economy. That is history, not the present. Since the election of Carlos Salinas, Mexico has inaugurated free-market reforms and become a growing, dynamic market. Moreover, it is a new market -- everyone needs everything from cars to computers to insurance -- rather than a replacement market like the United States, Europe and Japan.

If the United States fails to seize the export opportunities presented by Mexico and Latin America, others will rush in.

Mr. Perot's "giant sucking sound" is nonsense. In the first place, if American companies want to take advantage of Mexico's low wages, there is nothing to prevent them from doing so now. Moreover, wages are only one factor companies consider. If low wages were the alpha and omega of plant location, then Haiti and Bangladesh would be industrial giants. No, it is exactly the reforms NAFTA would create that would make it more beneficial for companies to remain in the United States, taking advantage of the highly skilled and extremely productive U.S. work force, and export to Mexico.

Yes, some workers (mostly unionized) in industries that are currently "protected" by high U.S. tariffs will suffer. There is no use denying that. Household glass and ceramics manufacturers are specifically mentioned by the U.S. trade representative. But those losses will be far outstripped by gains in other industries. So says every major study conducted on the economic effects of the treaty.

With NAFTA, the United States can expect 200,000 more export-oriented jobs by 1995 and many more in the years to come. Without NAFTA, those U.S. jobs will be forgone, and Mexico could suffer capital flight and declining growth.

The choice will come down to this: Do we want to export products to Mexico, thus raising the standard of living for both countries, or do we want to import immigrants from Mexico?